Market scorecard
US markets ended higher on Friday, capping off a beautiful week. The S&P 500 climbed 2.60% over those five days and the Nasdaq rose 2.87%. It's great that we've recovered so quickly, but investors remain anxious because Donald Trump is entirely unpredictable, and many of his ideas are bad for business confidence.
Late on Friday, Moody's downgraded US sovereign debt from its triple-A rating. The other two ratings agencies, Standard & Poor's and Fitch, had already taken this step years ago. One bond analyst said this was "a belated catch-up move without real implications of the US's creditworthiness."
In company news, CoreWeave jumped 22% to a record high after Nvidia disclosed a larger-than-expected stake in the cloud computing firm. Elsewhere, Apple and Epic Games are back in the ring, this time debating whether Apple is unfairly blocking Fortnite's return to iPhones. This is just the latest skirmish in their multi-year feud, which centres on Apple's tight grip over the App Store and the revenue it collects from in-app purchases.
On Friday, the JSE All-share closed up 0.30%, the S&P 500 rose 0.70%, and the Nasdaq was 0.52% higher.
Our 10c worth
One thing, from Paul
New clients sometimes ask us if we can also buy them ETFs. ETFs are exchange traded funds, and we don't like them.
The most common ETFs track the overall market, but we prefer our portfolios of carefully-selected stocks in favoured sectors (technology, healthcare and consumer). You are paying us 1% per annum to beat the market.
Some ETFs are downright dangerous. Products such as leveraged single stock ETFs or geared inverse ETFs are awful, and only make money for their issuers. They are monsters, designed by Dr Frankensteins. More complex means higher fees.
How about this truly nasty one: The Defiance Levered Long+Income Strategy ETF (Microstrategy).
The marketing blurb says it "seeks long-term capital appreciation, with a secondary objective to seek current income." They use "credit call spreads" and lots of leveraged exposure to MicroStrategy shares, aiming for 150% to 200% of its daily price performance.
Microstrategy is an already geared holder of Bitcoin. Eish, that's not going to end well.
Byron's beats
Are stocks a better investment than property? This is an age-old debate, and we clearly favour the former over the latter. Who better to explain why stocks are a preferable asset class than Warren Buffett? He spoke about this topic again in the most recent Berkshire Hathaway AGM.
He starts off by saying how much easier stocks are in terms of negotiations, contracts, multiple-party ownership and time spent.
He also talks about the late Charlie Munger's real estate transactions and notes that those were mostly an interesting game for him. If you are a billionaire, you can afford to play around with large building projects.
I cannot do full justice to Warren's argument by summarising it all, here it is, and it is only two and a half minutes long.
Michael's musings
Google parent company Alphabet is one of the cheapest tech investments around, trading on a forward multiple of only 17. The company is at an inflection point, facing competition from other AI platform providers and a couple of court cases calling it a monopoly. Regulators want to see Alphabet broken up.
There are now even calls on Wall Street for the group to be split, as the sum of the parts is probably worth more than its current market cap. Google search is still the big daddy, generating most of the revenue and profits, but given the current headwinds, the market places a discount on those profits, which then gets applied to all the other businesses in the group.
YouTube is very profitable and growing quickly. If it were similarly valued to Netflix, the earnings multiple jumps from 17 to 45. The Google Cloud business generated 13% of Alphabet's revenue last quarter; as a separate business, it too could see its multiple jump from 17 to around 35. And let's not forget Alphabet's side bets of Waymo and Gemini-AI, which could get valuations similar to a start-up, with a multiple in the 100s.
This is food for thought.
Bright's banter
Richemont rose over 7% on Friday after it reported a 4% rise in full-year sales to EUR21.4 billion, with its core jewellery Maisons, including Cartier and Van Cleef & Arpels, continuing to sparkle.
Jewellery sales rose 8% and now account for the lion's share of group revenue, helping offset a 13% decline in the specialty-watchmaking division. Direct-to-client sales now make up 76% of total revenue.
Sales in Japan surged by 25% and there was also double-digit growth across Europe, the Americas, and the Middle East. China remains soft for now, but Johann Rupert was characteristically calm, noting: "It helps to fly with five engines. If one goes down, you still have four."
Operating profit declined 7% to EUR4.5bn, dragged by once-off costs, but free cash flow and a rock-solid balance sheet support a dividend increase to CHF 3.00 per share.
In a luxury environment where most big names are bleeding sales, Cartier and Van Cleef & Arpels continue to defy the gloom, proving that ultra-high-end buyers are simply built different - richer, stickier, and still spending.
While others scramble to protect margins, Richemont is gaining market share and raising dividends. The stock is now up over 27% year-to-date, showing that resilience in the luxury space might just be spelled R-I-C-H.
Linkfest, lap it up
George Clooney's Good Night and Good Luck is breaking records. The Broadway show raked in $4 million in its first week - The highest-grossing play in history.
Companies are finding new uses for AI. Google has reduced the number of scam search results by 80% - Beating back the grifters.
Signing off
Most Asian markets fell this morning, even though China's industrial output expanded faster than expected in April. Over the weekend, the Chinese Communist Party issued a notice saying government officials must cut back on "receptions, alcohol and cigarettes, and wasteful spending on travel, food and office space."
In local company news, hospital group Netcare expects headline earnings per share for the six months ended March to rise by up to 22%.
US equity futures are lower in early pre-market trade. The Rand is at around R18.05 to the US Dollar. Let's see how that Moody's downgrade is perceived as the day wears on. Probably a non-event.
Huge congratulations to South Africa's U-20 national soccer team for being crowned champions of the CAF U20 Africa Cup of Nations 2025! Amajita have done the country proud with this historic achievement.
Have a good day and a good week.